The Info Pro

25 January 2010 – Robert Stevenson, Managing Director of Storage Research and Advisory - After a year of heavy server and storage consolidation that slowed big-ticket spending throughout IT organizations, TheInfoPro released new data today showing further effects of the recession on Fortune 1000 (F1000) and midsize enterprise (MSE) storage organizations. 

The in-depth study reveals that while 45% of F1000 respondents plan to increase storage spending in the coming months, 29% still expect major budget decreases. In contrast, 41% of MSEs plan to increase storage spending this year, while 25% expect further reductions.

Of the 300 plus interviews conducted, most show that major spending increases won’t resume until new business application installs once again create massive demands on storage needs, In the interim, storage shops will focus on productivity improvement and hardware inventory adjustments to prepare for virtualization and cloud support needs.

For more specifics on the data, please visit:  http://www.theinfopro.com/2010/01/tippr-012510/

05 January 2010 – Ken Male, Founder of TheInfoPro – Every quarter we hold a roundtable for our investor clients with an executive that is part of TheInfoPro’s  (TIP) peer network of IT decision-makers. At our most recent session, our guest, the CIO of a Fortune 1000 consumer goods company, discussed in great detail how he has rolled out a sophisticated “internal cloud” platform that has drastically reduced his spending on IT Infrastructure while providing a “foundation for unified global service and application delivery.” An overarching goal when he got buy-in from his management to embark on this was to “get the IT infrastructure out of the way of the apps and user community.” Before the move to internal cloud, the company’s annual IT spending was a 1:1 ratio of application to infrastructure to support it. Those days are over – the goal of the CIO at our roundtable is to make it 80% application and 20% infrastructure by 2011 – they are at about 65%/35% today.

For several years TheInfoPro has tracked a move to the commoditization of certain infrastructure elements (e.g., servers, low-cost storage tiers). The economic crisis has made companies work hard on “optimizing” their infrastructure, as demonstrated by technologies related to this scoring so high on the TIP Technology Heat Index®, which gauges the immediacy of user need and planned spending.

So what can we take from this event as we triangulate the CIO’s comments with our data from interviews with decision-makers who represent more than $23 billion in buying power for IT infrastructure? Several threads become apparent:

1) Spending on Optimization:  Investments in technologies that drive down the ratio of spending on IT infrastructure have dominated the top quartile of our respective Heat Indexes for the better part of the past 18 months and will continue into 2010. These include: 

• WAN Optimization – Our guest CIO cited his company’s WAN being 50Mbps, and it is optimized to 400-   600Mbps. 
• Thin Provisioning – This is enabling storage teams to increase their utilization rates dramatically, and to put off purchases. 
• Deduplication – Well-documented success for backup environments. Look for more primary storage to leverage this in 2010. 
• Server Virtualization – Nearly ubiquitous today for non-mission-critical applications, we are starting to see more discussion of production applications moving to virtual environments.
• Replication – Low-cost replication solutions are starting to minimize the use of expensive backup solutions.
• Unified Communications – Leveraging  this (e.g., VoIP) continues to be deployed in an evolutionary fashion.

2) Cloud Computing: Internal vs. External? The discussion of external cloud usage has been a catalyst for the move to drop the ratio of infrastructure spending. Many organizations are able to show that the cost differential to move external is minimal. In addition, the ability to allocate more spending to the applications allows IT to be a better business partner and to help drive revenue-generating activities.

Caveat emptor – the shift to internal cloud computing architectures does not come without some pain, specifically around licensing costs. As software companies try to use the move to more processing power via internal cloud in a virtualized environment to mean more money for them,  this is becoming a contentious point. This is one of the primary drivers for more things being considered to run on open source. Stay tuned for more work on this issue.

3) Open Source: Linux continues to grow in the enterprises mostly at the expense of Unix. One key reason is the software licensing issue mentioned previously; companies are trying to avoid additional licensing costs as more processing power gets shared by an application in a virtualized/cloud environment.

4) Standardization:  From 2002 to 2008 we saw a lot of  “flavor of the month”/“one of everything” mentality.  This has changed dramatically and will continue to do so. Operating expenses have been decreased dramatically since fall 2008, and standardizing is a means to lowering spending. In addition, the aforementioned move to internal cloud is also a driver to move to standard offerings.

5) Procurement Strategies: In our work with enterprises, we see firsthand the sophisticated techniques being deployed to drive down the spending with their infrastructure providers. As an example, expect reverse auctions to procure servers and storage to become common by the end of 2010.

The biggest challenge we hear in our interviews with the Global 2000 is the ability to manage this new cloud-like infrastructure – as our research has shown for the better part of the last year,  meeting SLAs, provisioning, lifecycle management – all come into play here and will be a key battleground for the vendors to provide an effective solution.

TheInfoPro has a research practice geared specifically to cloud computing and will continue the investigation of the storage, servers, networking and security markets. In 2010, we will report on the reality of the decreased spending ratio on infrastructure and how it is evolving. We suspect the trend toward changing the ratio of application to infrastructure spending will be a driver for more M&A activity by the technology providers who, not to sound cliché, are looking to become a “one-stop shop” and provide “one throat to choke.” More details on our M&A thoughts on this can be found in Barron’s October 2009 cover story: http://online.barrons.com/article/SB125633689630504703.html.

07 December 2009 – Bob Gill, Managing Director of Server Research and Advisory Services - Today we released our new Fall 2009 Server Study which still reflects a depressed server hardware market due to the recession, priority to consolidate and virtualization implementation.

The study however did show that growth in infrastructure server software deployments, such as operating systems and virtualization software, continues much more strongly than growth in hardware units, driven by the efficiencies derived from server virtualization.

Growth in the number of virtual machines deployed implies growth in virtualization software licenses, as well as for the OS instances required for each virtual machine.

A more interesting situation in the server market is brewing between VMware and Microsoft. Much of the strength of VMware is predicated on a homogeneous population of VMware servers under control of VMware management utilities. So you figure, the more heterogeneous the environment, the less VMware is positioned in the central infrastructural layer in the data center. Trouble for VMware, no, but there will be some of the market up for grabs.

Our press release today titled, “New Server Study Shows Threat to VMware Hegemony as Customers Plan Parallel Deployments of Microsoft and Virtualization Alternatives”  stated that while just over 75% of users report having VMware in use today, nearly two-thirds have tested a hypervisor other than VMware, with Microsoft and Citrix most often mentioned. Of those who have tested an alternative, 27% plan to use the alternative, while an additional 20% report they “may” use it.

When VMware customers were asked if they would switch to an alternative, only 2% cited firm plans, while an additional 9% were considering it. The analysis reveals that VMware users aren’t switching away from VMware, but are probably embracing competing technologies in heterogeneous deployments.

VMware is still the leading vendor in use and in plan for server virtualization, and few users report firm plans to switch from VMware to Hyper-V. However, this parallel deployment of Hyper-V, Citrix and Red Hat virtualization capabilities could signal a challenge to VMware’s dominance; this implies that heterogeneous environments will be commonplace, where VMware is used for production, and Hyper-V may grow through deployments for development and testing.

03 December 2009 – Bill Trussell, Managing Director of Security and Networking Research and Advisory – It would appear that the Nortel Enterprise business unit acquisition by Avaya is headed for closing this month, though questions remain as to the impact that this will have on the the enterprise customer. Most industry observers are recommending that enterprise customers wait out the acquisition and subsequent integration period before making any rash decisions on product adoption or abandonment. Data suggests, however, that this recommendation is not being observed by many enterprises as both Cisco and Microsoft are gaining consideration to supply IP voice infrastructure to both large and small enterprises.

The biggest question for the industry to consider is whether this acquisition was being made as one to spur growth or merely as an exit strategy for the private equity investors of Avaya. While a successful exit can seldom be accomplished without some indication of profitability ,the acquisition of Nortel by Avaya offers the opportunity to cut costs dramatically – and with a short focal length – in order to secure a pathway out for the equity owners. Such a strategy may very well lead current and newly acquired customers of the Nortel products down a dark path of not knowing whether the product just acquired will continue to be supported in good faith. If the acquisition is truly intended to spawn growth for Avaya, then they can ill afford to lose any customers for any reason. But our data indicates that this does not appear to be the case thus far as Nortel customers tell us they are looking to leave in favor of competing products from other providers. For that matter, Avaya does not have a good track record recently other than for their largest legacy systems which are not easily replaced.

As a result of this uncertainty, caution is likely the best enterprise strategy at this point.

23 November 2009 – Bill Trussell, Managing Director of Security and Networking Research and Advisory – With everyone seeking information on a possible recovery of IT spending, now is a good time to take a moment to review where the enterprise community is prioritizing its spending for 2010. With nearly three-quarters of the interviews complete, we can say with confidence that information security spending will likely recover in 2010. Nearly four in ten (37%) of enterprises interviewed will increase their information security spending next year, while less than one in five (19%) will experience declining spending. Around 25% of respondents indicated modest 1% to 10% growth in security spending next year, and almost half (44%) are indicating stable spending in 2010. These early returns compare favorably to the last group of interviews, completed in Q2 2009, in which 38% of respondents cited lower spending for 2009.

While we have yet to complete the full study’s sample of interviews, the results outlined above are significant as an indicator of increasing budgetary support for stronger information security initiatives in 2010.